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In what ways are joint ventures and partnerships alike?

Do shareholders of closely held corporations have any legal responsibilities to each other?

What is a shareholder voting agreement?

Why do corporate laws require that directors explicitly dissent from objectionable board decisions?

Do limited liability companies follow the partnership or corporation model for dissolution?

Can closely held businesses be bought and sold?

What are the possible consequences of personal liability for business debts and obligations?

What are the differences between C and S corporations?

What are the benefits and drawbacks of nonprofit, tax-exempt status?

What types of legal procedures should corporations maintain?

Asset Purchase vs. Stock Purchase - Advantages and Disadvantages

In purchasing an existing business, it is necessary for the purchaser to make a determination whether he or she is going to seek to purchase the assets of the business or the stock of the business entity. An asset purchase involves the purchase of assets of the selling company. A stock purchase involves the purchase of stock of the selling company. The following table discusses the advantages and disadvantages of asset purchases as compared to stock purchases.

Advantages of an Asset Purchase Compared to a Stock Purchase	Disadvantages of an Asset Purchase Compared to a Stock Purchase
In an asset acquisition, the buyer is able to specify the liabilities it is willing to assume while leaving other liabilities behind. In a stock purchase, on the other hand, the buyer purchases stock in a company that may have unknown or uncertain liabilities.	It is necessary for the selling company's assets to be re-titled in the name of the buyer. This is not required in a stock transaction.
If the purchase price exceeds the aggregate tax basis of the assets being acquired, the buyer receives a stepped-up basis in the assets equal to the purchase price.	In a stock transaction, the buyer can normally obtain the selling company's non-assignable contracts, permits, and licenses without the consent of the other party to the contract, permit, or license.
By purchasing assets rather than stock, the buyer avoids the problems presented by minority shareholders who refuse to sell their shares.	Asset purchases do not qualify for tax treatment as a tax-free reorganization.
Purchasing a business through an asset acquisition is less complicated from a securities law perspective because the parties are not normally required to comply with state and federal securities laws and regulations.	If the selling company does not have a large number of shareholders, a stock transaction will normally be less complicated.
Goodwill can be amortized by the buyer for tax purposes over a period of fifteen years.	In states that impose sales or transfer taxes on the sale of assets, a stock transaction can avoid some or all of these taxes that apply in the event of an asset transaction.

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